Xi Jinping’s Party Congress Speech: Yes to 0-Covid, no to market reform?

Hong Kong
CNN Business

Although the Chinese economy is surrounded by problems From the real estate crisis to youth unemployment, Xi Jinping didn’t come up with any great ideas to get the country on track during his time. opening speech lasted two hours at the Communist Party Congress on Sunday.

The Chinese leader is expected to secure a unprecedented third term at the one-week conference. The priorities made at the political meeting of more than 2,000 party members will also set China’s trajectory over the next five years or even longer.

In his speech on Sunday, Mr. Xi adopted a confident tone, underscoring China’s growing power and growing influence during his first decade in power. He also repeatedly emphasized the risks and challenges facing the country, including Covid pandemicHong Kong and Taiwan – all of which he claimed that China had escaped victory.

But experts fear that Mr. Xi is showing no signs of leaving the country’s rigid zero Covid policy or its strict regulatory stance on various businesses, both of which have hampered growth. of the world’s second largest economy.

China's President Xi Jinping speaks during the opening session of the 20th Communist Party of China Congress at the Great Hall of the People in Beijing on October 16, 2022.

“Yesterday’s speech confirmed what many China watchers have long suspected – Mr. Xi has no intention of pursuing market liberalization or easing China’s zero-Covid policies, at least not yet. not soon,” said Craig Singleton, senior fellow for China at the Foundation for Defense of Democracies. a DC-based consulting organization.

“Instead, he intends to double down on his policies toward security and self-reliance at the expense of China’s long-term economic growth.”

China is the last major economy in the world that still enforces strict zero-Covid measures, which aim to eliminate chains of transmission through border restrictions, mass testing, widespread quarantine. and uncompromising fast locking.

And the Chinese economy is in bad shape. Growth has stalled, youth unemployment is at a record high, and the housing market is in turmoil. The ongoing Covid lockdowns have not only wreaked havoc on the economy, but also fueled social discontent.

Last week, two big banners was hung on the flyover of a major road in Beijing, protesting against Mr. Xi’s Covid policy and dictatorship. It was a rare protest against the country’s top leadership, signaling public frustration and anger.

Many international organizations, including the IMF and World Bank, recently downgraded China’s GDP growth forecasts for this year, citing zero-Covid as one of the major hindering factors.

However, Mr. Xi praised the government’s compliance with zero-Covid, saying it had “achieved remarkably positive results”.

Mr. Xi’s speech – a summary of the Communist Party’s work report, or action plan – was similarly brief in terms of concrete solutions to other challenges facing the economy during this time. next time.

“We believe the ongoing Party Congress may not be an inflection point for major policy changes,” Goldman Sachs analysts said on Sunday, adding that they believe China could No easing of Covid restrictions until at least Q2 2023.

On the real estate sector, Mr. Xi stressed the need to provide affordable housing and dampen speculative demand – but did not specifically mention the decline in real estate. has exploded into a major crisis over the past few years, threatening economic and social stability.

“We maintain our view that a comprehensive solution to the beleaguered real estate sector is unlikely to be delivered until after March 2023, when the real estate crisis is over,” said Nomura analysts. complete political reform”.

Xi also made no mention of the record youth unemployment rate, which is mainly the result of his year-long crackdown on the tech industry amid punishing zero-Covid policies.

In the full version of the official work report of the 20th Party Congress, has been published shortly after his speech, Mr. Xi stressed the need to continue to crack down on the party’s “antitrust” and regulate “excessive income”, a sign that he will continue to get tough on big business and rich individuals.

Beijing’s sweeping crackdown on the country’s private sector, under the banner of Mr. Xi “Common Prosperity” campaign, has beaten a number of companies in fields ranging from technology and finance to gaming and private education.

The government has defended the campaign as necessary for “social justice” and closing the income gap.

In his speech, Mr. Xi also made it clear that development was a “top priority” and emphasized continuing to focus on “high-quality growth”.

That could dispel some market concerns that the government is no longer interested in economic growth, UBS analysts said.

However, to achieve Xi’s goal of making China a “middle-developed country” by 2035, the country’s annual real GDP growth would need to average around 4.7% a year from 2021 to 2035, UBS analysts said. That could be “quite challenging,” they noted, adding that they expect China’s potential growth to average between 4% and 4.5% a year this decade and drop lower. after 2030.

Meanwhile, a comparison between this year’s speech and Mr. Xi’s last speech in 2017 at the 19th party congress reveals a worrying trend.

Goldman analysts say the frequency of words like “security”, “people” and “socialism” being used in 2022 has increased compared to 2017, while the word “economics” , “market” and “reform” fell again.

Nomura analysts have also noticed this change, which they say may indicate a “change in the party’s mission”.


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